Washington Adopts Uniform Environmental Covenants Act

July 25, 2007

Deed restrictions are commonly used in remedial actions where it is not cost-effective or technically feasible to remove all contamination from a site, or where restricting access will sufficiently mitigate human and environmental risk. Hundreds of deed restrictions have been recorded but, until recently, the form of these deed restrictions often was determined on an ad hoc basis. That has now changed as 17 states have adopted a model act setting out specific requirements as to how environmental covenants will be used and enforced.[1]

Washington state joined this trend when it adopted the Uniform Environmental Covenants Act (“UECA” or the “Act”) earlier this year.[2] The Act became effective this past week, on July 22, 2007. In addition to setting forth specific requirements for Potentially Liable Parties (“PLPs”) who leave contamination in place, the UECA also requires the Washington Department of Ecology (Ecology) to create and maintain a permanent, on-line registry of environmental covenants that is publicly available without the need for a formal records request. Ecology is required to review environmental covenants at least every five years.[3]

Institutional Controls in Washington: The Use of Restrictive Covenants

Washington’s Model Toxics Control Act (MTCA) generally requires that institutional controls such as restrictive covenants be imposed on contaminated property whenever the remedial action conducted will result in hazardous substances remaining in soil, groundwater, or other media at concentrations that exceed applicable cleanup levels, or when Ecology determines that such controls “are required to assure the continued protection of human health and the environment or the integrity of the interim or cleanup action.”[4]

The purpose of a restrictive covenant is to prohibit activities that may interfere with a cleanup action, operation and maintenance, or monitoring, or may result in the release of a hazardous substance that was contained as a part of the cleanup action. Restrictive covenants must be recorded in order to give adjoining property owners, future purchasers and tenants, and the general public notice of the restrictions on use of the property. Property owners are also required to notify Ecology prior to any lease or sale of the restricted property.[5]

Rationale for Enacting The Uniform Environmental Covenants Act

While restrictive covenants have been used for many years, they have sometimes been held unenforceable. Under the common law, restrictive covenants have been rendered unenforceable based on waiver, abandonment, or acquiescence.[6] Similarly, adverse possession or foreclosure of a tax lien has been held to extinguish a restrictive covenant.[7] Finally, common law doctrines such as the rule against perpetuities may invalidate a perpetual restriction, and requirements for privity or appurtenance have been used to defeat covenants in some jurisdictions.[8]

To address the limitations of common law restrictive covenants, the UECA provides for the perpetual legal survival of environmental covenants which run with the land, regardless of changes of property ownership. The UECA also creates a system for maintaining permanent records of environmental covenants.[9] The UECA contains no substantive environmental requirements, but rather contains procedural requirements for how such covenants are recorded, monitored and enforced.

UECA Basics

The UECA defines an environmental covenant as a servitude arising under a remedial action that imposes activity or use limitations on real property.[10] Although an environmental covenant may not allow uses of land otherwise prohibited by existing zoning regulations, it may restrict uses that are otherwise allowed.[11] Before approving the land use or activity restrictions contained in a restrictive covenant, the Act directs Ecology and/or EPA to consult with local land use planning authorities, and consider potential redevelopment and revitalization opportunities, obtain information regarding present and proposed land and resource uses, and consider applicable comprehensive land use plan and zoning provisions.[12]

The UECA applies to environmental remediation performed under either federal or state law, including remediation conducted under Washington’s Voluntary Cleanup Program.[13] The UECA requires that an environmental covenant meet the following formal requirements. The “grantor” of the covenant must:

provide a legal description of the real property subject to the covenant;

identify the parties involved;

identify the nature of the limitations imposed by the covenant;

identify the remediation action with which it is associated;

be signed by the agency with jurisdiction (Ecology or EPA), all grantees of the covenant, and the property owner; and

be recorded in every county in which any portion of the affected property lies.[14]

The “grantee” of an environmental covenant may include any person who owns an interest in the real property affected, EPA or Ecology, or a municipality or other local unit of local government. An environmental covenant may identify more than one grantee, or “holder.”[15] The interest of a grantee/holder is an interest in real property, and the covenant may be enforced through a civil action for injunctive or other equitable relief by:

a party to the covenant;

the agency;

any person granted power to enforce by the terms of the covenant;

a person whose interest in the real property or whose collateral or liability may be affected; and

a municipality or other unit of local government in which the affected property is located.[16]

The right to enforce an environmental covenant does not give rise to liability or responsibility for environmental remediation, nor is an agency’s regulatory authority limited by its rights to enforce under the UECA.[17]

An environmental covenant is perpetual, unless by its own terms it is limited in time or by the occurrence of some event.[18] However, an environmental covenant may be terminated or modified by mutual consent of the agency, the current landowner, the holder of the covenant, and all signers of the covenant.[19] The covenant may also be terminated by court order upon a finding that termination will not adversely affect human health or the environment, a determination by Ecology or the EPA that the benefits of the covenant can no longer be realized, the foreclosure of an interest with priority over the covenant, or by eminent domain proceedings.[20]

Before approving the land use or activity restrictions contained in the covenant, the agency (Ecology or the EPA) must consult with the local land use planning authorities, and consider potential redevelopment and revitalization opportunities, obtain information regarding present and proposed land and resource uses, and consider applicable comprehensive land use plan and zoning provisions.[21]

Ecology has updated the language in its model Restrictive Environmental Covenant to make it consistent with the UECA,[22] and started requiring the use of the updated language in restrictive covenants prior to the effective date of the UECA.[23]

Implications and Unanswered Questions

For some groundwater contamination sites, the plume of contaminated groundwater extends for some distance and impacts numerous properties. Ecology’s regulations require PLPs to at least try to obtain a restrictive covenant from every property owner whose property overlies the plume.[24] Those covenants will now have to comply with the UECA.

It is Ecology’s position that the burden is on the PLP to negotiate with owners of all affected properties to secure their agreement be bound by the covenant.[25] If the PLP is unsuccessful, and Ecology cannot facilitate an agreement, then Ecology may determine that the proposed remedy is not implementable, and may require a more extensive cleanup.[26]

One issue that has not been addressed in Washington is whether a restrictive covenant may be imposed through a condemnation action. In at least one Oklahoma case, a PLP argued that it should be permitted under an eminent domain statute to condemn its neighbor’s land and impose a restrictive covenant and institutional controls, when the PLP and the neighbor could not agree to an amount of compensation the neighbor should be paid to agree to such a covenant.[27] Although the Tenth Circuit Court of Appeals concluded in that case that the implementation of a CERCLA remedy did not constitute a valid basis for a private condemnation for “sanitation” purposes under Oklahoma law, it did not foreclose a state or federal agency’s ability to exercise eminent domain authority to facilitate an environmental cleanup.[28]

[1] Washington is the seventeenth state to adopt the UECA, following Delaware, the District of Columbia, Hawaii, Idaho, Iowa, Kentucky, Maine, Maryland, Nebraska, Nevada, Ohio, Oklahoma, South Dakota, Utah, the Virgin islands, and West Virginia. It has been introduced in 13 other states. National Conference of Commissioners on Uniform State Laws, “Washington 17th State to Enact Uniform Environmental Covenants Act.”